Economy grew 0.7% in GDP terms last year

The Irish economy grew by 0.7% in GDP terms in 2011, the first full-year increase since 2007.

However, despite this, the latest quarterly national accounts from the CSO indicate that Irish GDP fell by 0.2%, marking the second consecutive quarterly decline — thus, meaning that the economy is technically back in recession.

This was on the back of a 3.4% fall in Government spending and a 1.1% fall in exports, during the last three months of the year.

Reaction to yesterday’s figures was mixed. Davy Stockbrokers suggested that there was “little to be learned” from what are still preliminary figures.

According to Conall MacCoille, Davy’s chief economist, “The potential for revisions means that Ireland may not actually have suffered two quarters of negative growth. Annual GDP growth has been revised by 1.5%, on average, in past revisions.”

He added: “Exports fell by 1.1% in the final quarter, but were up by 3.2% in the year. The fall in the fourth quarter partially reflects measurement problems relating to the pharmaceutical sector. Just as in 2011, a sharp bounce-back in exports may be likely in the current quarter as these distortions unwind. Our view remains that GDP growth will slow to 0.4% in 2012, due to weaker euro area demand conditions. But, this data probably overstates the slowdown in the Irish export sector.”

John Fahey, at Ulster Bank, meanwhile, has forecast GDP growth of just 0.2% for 2012, “as positive — but slower — growth in exports is expected to just outweigh further declines in domestic demand.”

Alan McQuaid, Bloxham chief economist agreed that there were no real surprises in yesterday’s CSO information: “The data again underlines the clear dichotomy between the strong export performance, on the one hand and weak domestic demand on the other, a trend that looks set to continue for some time to come. This means that GDP growth, this year, will once more be driven by exports and overseas demand for Irish goods and services.”

Bloxham is anticipating 0.5% GDP growth for Ireland this year; although Mr McQuaid said he agrees with Michael Noonan’s recent comments that the economy may take off “like a rocket” next year, if the global growth picture brightens — given the substantial competitiveness gains Ireland has made over the past couple of years.

Industry and agriculture were the main drivers of last year’s total GDP growth — up by 4.5% and 2%, respectively; but all other facets of the economy registered declines.

The CSO data also showed that the economy, when measured on an GNP basis, which excludes multinational contribution, fell by 2.5% last year.

“The headline quarterly [GDP] number will be a disappointment to consensus and the politicians, but it was not all bad, said chief economist at NCB Brian Devine.